Of growth, success and its limits

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Image from kellogg.northwestern.edu

Last week I introduced the concept of systems archetypes and how they were linked in an ecosystem of issues. I mentioned that it was important to know that these archetypes exist because, without fully understanding their nature, we might try to solve problems in a simplistic one-dimensional manner when a more in-depth analysis is required. And this has all to do with systems archetypes. In today’s article, we unwrap the first two archetypes, “Limits to Success” and “Success to the Successful”.

Related: http://www.strategyinnovationgrowth.com/#!What-systems-archetypes-teach-us-about-solving-the-trickiest-of-situations/cnsk/550590630cf2458597c89c11

Limits to Success

The most fundamental concepts of systems thinking are reinforcing loops and balancing loops. What in essence this means is that things can grow faster and faster in initial stages of growth because there are “easy pickings” in the system to be had. Then we are better and more efficient in our delivery systems and we grow even more. The positive word of mouth also helps. Yet in all instances, growth doesn’t last forever. There will be limits to success when the balancing forces kick in. These can be the typical lifecycle of the product, or the “shriveling of market”. If the business does not take action to increase its market through a new product mix, or rebuy opportunities, the limits will kick in faster. And no amount of beating up the sales people will lead to the growth and success that you demand; it’s not a sales problem, it is a systems problem!

Success to the Successful

While the first archetype saw the interaction between the two fundamental forces – reinforcing and balancing – this archetype sees the confluence of two reinforcing loops. This happens when an initial reinforcing loop causes one to grow, and perhaps faster than the rest of the players in the market. This causes a second reinforcing loop to kick in – the defection of customers from other players to the fastest grower. Ultimately, success will lead to greater success, bringing in more resources to pull away from the market. This leads to the famed archetype of “Success to the Successful.”

How to overcome these archetypes

For the Limits to Success archetype, we have already mentioned that the way to overcome this is to move onto a new S-Curve. Constantly create new products and services, increasing rebuys and also pulling in new customers. Use your increased revenue to broaden your market, not make your business more expansive, and thus, expensive. Many businesses, when faced with an increase in business, expand too fast, bringing in more capacity than they actually need over the long run. And when the limits kick in, they implode under the weight of all the fixed costs. Don’t grow your fixed costs at the same rate as your growth; instead go variable. You might find yourself paying more when times are good – which you can afford – yet save yourself the pain of going under when times are bad.

Obviously, there is no downside when you are on the receiving end of Success to the Successful. Yet, because of your success, you become a target. Others will want to take your position and they will find new ways to eat your market when you are not looking. This is what Samsung did to Apple. For the longest time, Apple ruled the smartphone market. Samsung started out not by going into the smartphone market but the chip market. They stayed out of Apple’s market and became Apple’s supplier, all the while learning about what works and what doesn’t. Only when they have accumulated all the knowledge for sustaining in the smartphone market did they then launch, catching Apple and many other incumbents by surprise. Because of Samsung’s financial and marketing might, they quickly took the smartphone mantel. And they ruled for a while before they too are now the subject of competitive pressure from China’s Xiaomi. So if you are enjoying increased success because of your success, think of the next curve. Or look to lock competitors out due to your current strength. What you cannot do is sit back and enjoy your success. That might be a very short ride.

Success never lasts

You might say that this won’t happen to you because you have this-and-that thingamajig that will keep you earning. Even companies with dozens of patents find themselves ring-fenced. After all, success never lasts. If you want to remain successful, you need to take a proactive, sometimes even dim, view of the future market, constantly moving yourself up the value chain, creating new products, new features, new markets.

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